Christodoulou Says Loans Help Greece Avoid Default

Petros Christodoulou, head of Greece’s debt agency, said the European Union loan package is giving the country leeway to focus on its fiscal-consolidation measures and there’s no reason to expect a default.

“The package we received gives us the luxury not to think about it at this stage,” Christodoulou said at “The Sovereign Debt Briefing” in London hosted by Bloomberg Link, referring to potential future debt sales. “No one at the moment is looking at a restructuring in Greece, no one in Greece, no one outside Greece.”

Moody’s Investors Service cut Greece’s credit rating by four steps to junk on June 14, citing “substantial” risks to economic growth from the austerity measures tied to the rescue package from the EU and the International Monetary Fund. Greece has cut spending, raised taxes and reduced wages to tackle a budget deficit that swelled to 13.6 percent of gross domestic product last year, more than four times the EU limit.

Christodoulou declined to say when Greece will start issuing bonds again.

“It’s difficult to say,” Christodoulou said. “I can’t make a forward-looking comment on that.”

Extra Yield

Luxembourg Finance Minister Luc Frieden said the EU loan package to Greece is “enough for the time being” and that the country “won’t default.”

“We stand ready to support Greece if something exceptional goes wrong,” he said in a Bloomberg Television interview at the conference. “Greece is doing the right thing and it will manage” to meet its targets “without help.”

The extra yield investors demand to hold 10-year Greek debt instead of the benchmark German bunds rose nine basis points to 781 basis points. That’s the most since May 7, before the aid package was announced, based on close-of-day data.

Credit-default swaps on Greece rose 38 basis points to an all-time high of 970 basis points, according to CMA DataVision.

Greek bonds are the worst performers in the euro region this year, falling 19 percent, according indexes compiled by Bloomberg and the European Federation of Financial Analysts Societies. German bonds returned 6.5 percent.

Asked if he favors a ban on naked short selling of credit-default swaps on euro-region government bonds, Christodoulou said the market should be “properly regulated.” Naked short selling involves selling a security without being in possession of it.

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